The potential candidates to fill the all-powerful job of governor of the Bank
of England are all flawed

Wanted: applicants for the post of Britain’s most powerful technocrat. Required qualifications include unmatched knowledge of macro and micro economics, in-depth experience of banking and the complexities of modern finance, natural authority, exceptional communication and media skills, outstanding administrative abilities, proven leadership qualities and a deity-like ability to transcend the political divide.

It is small wonder that George Osborne is struggling to find a suitable candidate for the post of governor of the Bank of England, which falls vacant when Sir Mervyn King retires next June. By consolidating responsibility for banking supervision and financial stability under the same roof as the Bank of England’s existing monetary functions, the Chancellor has created a huge job and an almost impossible ask.

There have been plenty of suggestions as to who might fill the post. But over the past month, virtually all these candidates have been found wanting in one way or another.

Paul Tucker, the deputy governor, is the outstanding internal applicant and in some respects the most obviously qualified. But he has had his chances spoiled, possibly beyond redemption, by the revelation that he failed to grip Libor manipulation when the problem became apparent in 2008. Excruciatingly embarrassing emails revealed an unduly chummy relationship with the now fallen Barclays chief executive, Bob Diamond, further damaging his prospects.

It’s been a long time since we’ve had a career commercial banker in the post – Robin Leigh Pemberton was the last, in the 1980s – and these days bankers are held in such low regard that it is hard to see a Government as beholden to the shifting sands of public opinion as this one opting for such a person. In Lord (Stephen) Green, the former chairman of HSBC, a lay preacher and now Minister For Trade, Mr Osborne might nevertheless have believed he’d found one saintly enough to fill the post. Unfortunately, he too seems to have been holed below the waterline by recent revelations. News that HSBC systematically laundered drug money while Lord Green was in charge has, to put it mildly, been something of a setback.

By common agreement, Mark Carney, a former investment banker with quite a long pedigree in public service, would make an excellent choice. As chairman of the Financial Stability Board, the body charged with the international financial reform agenda, he’s well respected globally and has achieved outstanding success at the Bank of Canada. The fly in the ointment is that he is Canadian, and while this doesn’t necessarily rule him out, there is no obvious reason why he would want to commit to eight years of hard graft in a foreign land.

Lord O’Donnell, the former cabinet secretary, commands some strong support in Whitehall (obviously), and in many respects appears supremely well qualified. He’s no Mervyn King, but that’s not what’s required – many would go further and say another King, a poor delegator who is notoriously intolerant of dissent, is the last thing we need. The role being created is much more akin to that of executive chairman, requiring a steady hand to coordinate the three functions of monetary policy, financial stability and supervision into a coherent whole. Gus O’Donnell is well trained in these skills, but he is perhaps too identified with the policies of the last government to be acceptable.

As for Jim O’Neill, there are few more personable and insightful international economists, but would the Government really be bold enough to appoint a Goldman Sachs lifer to such a key post? For many, it would be further evidence that Goldman does indeed run the world. Whatever else the governor is, he must above all be seen as completely impartial. Mr O’Neill would attract constant sniping for his former allegiances, however unfairly.

That leaves Lord Turner, chairman of the Financial Services Authority, as the last man standing. To the horror of the Tory Right, it’s beginning to look as if he’ll get the job by default – more proof, if it were needed, that this is a Government that attempts to rule by limp-wristed indecision and consensus rather than conviction. Of all the known candidates, Adair Turner has been the most overt in his campaigning, giving speeches and briefing journalists whenever he can. He seems to want it more than anyone – almost indecently so – in his eagerness chopping and changing his position according to whichever way he thinks the political wind is blowing.

No one doubts Lord Turner’s intellectual credentials or qualifications. He’s McKinsey, or Davos, Man through and through – the closest thing Britain has to a French énarque, or product of the grandes écoles. For long part of the public policy and business elite, he seems to float effortlessly from one influential position to another. Unfortunately for him, he is also widely regarded as a New Labour luvvie, and in the past has been responsible for what many on the Right regard as a load of wishy-washy, “third way” nonsense of little relevance to our straitened times – on low pay, pensions, climate change and much else besides. Treasury aides worry about a supposed tendency to buckle and flip flop under pressure, never a good trait in a central banker.

Whoever the Chancellor chooses will have to answer some profound questions about the future of central banking and the economy. Money is only a means of trade and exchange, yet over the last decade or two, it has been catastrophically mismanaged at almost every level. As custodians of the monetary system, central bankers have been a large part of this mischief.

Nor, having messed up so spectacularly in the years before the crisis, is it clear they’ve got their response to it entirely correct either. The Coalition’s proclaimed economic policy is one of fiscal conservatism and monetary activism. In practice, the fiscal conservatism seems to be as absent as the monetary activism is ineffectual.

By helping the Government finance the deficit, quantitative easing has prevented a more draconian fiscal contraction and supposedly rescued the economy from the sort of violent collapse in credit and money supply that occurred in the Great Depression. The process has been grossly unfair on savers, and undermined faith in fiat money all round, but presumably savers would have been even worse off in the alternative of mass liquidation. Many of them would have lost everything.

The other main beneficiaries of QE have been bankers, who have effectively been further bailed out by it. Regrettably, there is not much evidence of it doing anything to restimulate demand and growth, and you have to wonder what’s become of all that newly printed money – worth a third of the national debt in Britain at the last count. The longer QE goes on, the more it looks like straight financing of the deficit and the harder it is for the Bank of England to explain away its actions as “unconventional” monetary easing. The Government might as well have used Bank bond-buying simply to cancel its debts, or handed the money to consumers to spend. It would have done more good.

In the years before the crisis, central banks were widely credited with super-human ability to keep the economy safe – mistakenly, it turned out. It seems ironic that the Bank of England’s reward for failing to see all this coming should be that it – and whoever takes the helm – will now be vested with even greater powers.